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Chapter 35. Bookkeeping and Accounting > Effect of Business Transactions

Effect of Business Transactions

The proprietor must know the effect of all business transactions on his or her assets, liabilities, and proprietorship in order to make decisions regarding future operations. Accounts furnish the proprietor with a record for this purpose, which is why it's critical that accounts be concrete, precise, and accurate.

For example, if the proprietor is considering hiring additional sales associates, he or she should know the results of the existing sales force to be able to estimate the probable results of hiring additional personnel. If the proprietor is considering purchasing additional merchandise, equipment, or space, attention should be given to the results from existing facilities.


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